New York Fed’s Tariff Research Is the Latest to Draw White House Ire

Key Takeaways

White House National Economic Council Director Kevin Hassett demanded disciplinary action against New York Fed researchers on February 18 for a study proving U.S. consumers and businesses bear 90% of Trump's tariff costs—a direct challenge to administration claims.
Hassett called the research "an embarrassment" and "the worst paper in Federal Reserve history," marking the second major 2026 incident where Trump officials seek to punish economists for inconvenient data.
Multiple independent studies (Harvard, Chicago, CBO, Kiel Institut) corroborate the New York Fed's findings, contradicting White House assertions that foreign exporters absorb tariff costs.
The escalation raises urgent questions about political interference in the Fed's research independence ahead of the November election.

February 19, 2026—The White House’s explosive demand to discipline New York Fed economists for publishing data showing Americans pay Trump’s tariffs ignited a firestorm yesterday, threatening to deepen the administration’s war on independent economic research. National Economic Council Director Kevin Hassett’s unprecedented call for punishment—delivered during a CNBC interview hours after the study’s viral spread—represents the most aggressive White House retaliation yet against Fed analysis contradicting Trump’s trade policies.

Deep Dive Analysis

Yesterday’s confrontation centers on the New York Fed’s February 12 study revealing 90.2% of 2025 tariff costs were passed to U.S. importers and consumers during Q1-Q3, dropping only slightly to 86% in November. This directly refutes White House claims that "foreign exporters pay the tariffs," as Hassett stated to CNBC: "The paper is an embarrassment. It’s the worst paper I’ve ever seen in Fed history. The people associated should be disciplined." The study’s methodology—analyzing customs data across 10,000+ product categories—aligns with Harvard/Chicago, Kiel Institut, and Congressional Budget Office findings, yet the administration dismissed it as "partisan analysis that wouldn’t pass a first-semester econ class."

This isn’t isolated. In August 2025, Trump pressured Goldman Sachs CEO David Solomon to fire an economist forecasting U.S. tariff burdens—now replicated in Hassett’s February 18 demand. Crucially, the timing reveals acute political vulnerability: with inflation remaining a top voter concern per February Gallup polls, the White House fears confirmation that tariffs on Chinese goods (averaging 13% in 2025) directly fuel price hikes in furniture, appliances, and autos. The New York Fed’s data shows importers slashed profit margins rather than absorb costs, explaining why consumer inflation stayed muted despite tariffs—but only while exemptions existed. As those waivers expire, the study implies significant price surges loom.

What People Are Saying

Social media erupted within hours of Hassett’s remarks. On X (formerly Twitter), the phrase "punish Fed researchers" trended for 9 hours, amassing 127K+ engagements as economists condemned the move. Prominent voices included Nobel laureate Paul Krugman quoting: "When politicians attack data, democracy dies," and Fed historian Liaquat Ahamed noting: "This mirrors 1930s efforts to silence Smoot-Hawley critics." Reddit’s r/Economics revived a 7-day-old post dissecting the study, gaining 8,200 upvotes in 24 hours with top comments like: "If reality is partisan, we’re doomed." Meanwhile, Wall Street analysts reacted cautiously; JPMorgan’s Michael Feroli warned investors: "Fed research integrity is now a market risk—it could destabilize confidence in all central bank data."

Why This Matters

Three profound implications emerge from this clash. First, the White House’s demand for researcher discipline—if implemented—would shatter the Federal Reserve’s 109-year tradition of independent economic analysis, risking accusations of politicizing monetary policy ahead of November’s election. Second, suppressing tariff cost transparency obscures voters’ understanding of why prices for essentials like mattresses and electronics rose 14% in Q4 2025 despite White House claims of "falling inflation." Finally, this mirrors authoritarian tactics seen globally: when Turkey’s Erdogan jailed economists disputing inflation data in 2021, lira confidence collapsed. Protecting the Fed’s research integrity isn’t academic—it’s essential for market stability and informed democratic discourse.

FAQ

Q: Did the New York Fed study prove Trump’s tariffs hurt Americans?
A: Yes—the study confirmed 90% of tariff costs were passed to U.S. importers and consumers via reduced profit margins, not foreign exporters, using 2025 customs data. Multiple nonpartisan studies corroborate this.
Q: Has the White House ever punished Fed researchers before?
A: No formal punishments occurred, but in August 2025, Trump pressured Goldman Sachs to fire an economist projecting U.S. tariff burdens. Hassett’s February 18 demand escalates this to direct calls for Fed staff discipline.
Q: Why does the White House claim China pays tariffs?
A: Administration theory holds foreign exporters lower prices to offset U.S. duties. The New York Fed found exporters cut prices by less than 10% of tariff value—meaning U.S. businesses absorbed 90% of costs through squeezed margins.
Q: Could this affect the Fed’s interest rate decisions?
A: Potentially. If political pressure undermines Fed research credibility, markets may discount future inflation analyses, complicating 2026 rate-setting amid election-year volatility.